Objective: To evaluate postural stability and functional performance and study its relationship with psychological factors (pain catastrophizing, kinesiophobia and pain self-efficacy) in patients with knee osteoarthritis which will help us plan an effective treatment protocol in future. Methods: 40 patients with knee osteoarthritis were included in this study. Postural stability and functional performance were tested using Multidirectional Reach test and 9-Step stair climb test respectively. Self-report measures were used to assess the following: pain catastrophizing (Pain Catastrophizing Scale-PCS), fear avoidance beliefs (Tampa Scale for Kinesiophobia TSK-11) and self-efficacy (Pain Self-Efficacy Questionnaire-PSEQ). Results: There was a significant negative correlation of forward reach with pain catastrophizing and kinesiophobia and a significant positive correlation of forward reach with pain self-efficacy. There was no significant correlation of backward reach with all psychological factors (PCS, TSK-11, PSEQ). There was a significant negative correlation of both lateral reaches with pain catastrophizing and significant positive correlation with pain self-efficacy. There was a significant positive correlation of functional performance (stair climb test time) with pain catastrophizing and kinesiophobia. Conclusion: It can be concluded that psychological factors affect postural stability and functional performance in subjects with knee osteoarthritis and hence should be considered in treatment planning and intervention.